Posts in Insider Trading Litigation.

A Second Circuit Panel held that the Supreme Court's Salman decision abrogated the Circuit's Newman requirement of a "close personal relationship" under the "gift theory" of insider-trading; the dissent claims the Panel decision instead abrogates Dirks' "trading relative or friend" limitation.

Martoma was a portfolio manager at SAC Capital, who traded and tipped Cohen on inside information from scientists developing a potential Alzheimer's drug at Wyeth and Elan. He was convicted of insider-trading under the "gift theory" recognized by the Supreme Court's Dirks opinion ...

Trader Joseph Ruggieri finally prevailed last week, when SEC Commissioners Stein and Piwowar split on whether Enforcement proved his four trades (in 2010-2011) were made on inside information.

In September of 2015, SEC ALJ Patil held for Ruggieri, finding that two of the six accused trades were independently justified and the other four lacked proof of tipper-benefit (applying Newman). See T. Potter, SEC's Home Court Loss Undermines DOJ's Newman Argument, Law360 (Sept. 17, 2015) and here.

The Enforcement Staff sought Commission review, which was granted in December 2015 ...

A unanimous Supreme Court reaffirmed the "gifting" theory of insider trading under Dirks and rejected Newman "to the extent" it required more.

The Court's long-standing rule in Dirks v. SEC, 463 U.S. 646, 664 (1983) allows a jury to infer a tipper's personal benefit "where the tipper receives something of value in exchange for the tip or 'makes a fit of confidential information to a trading relative or friend.'"

Recently, the Second Circuit appeared to limit the "gifting" theory. In United States v. Newman, 773 F.3d 438, 452 (2nd Cir. 2014), cert. denied, 577 U.S. ___ (2015), the Court ...

On October 5, 2016, the Supreme Court in Salman v. United States will hear oral argument on its first insider trading case in nearly 20 years. At issue is whether a tipper must receive a pecuniary benefit for a tipper and tippee to be held criminally liable under 10b-5, or whether disclosure by itself can trigger liability. This case will resolve a circuit split that ranges from the broad view that a tipper and tippee are liable if the disclosed inside information is a "gift" to the narrow view that the tipper must receive a tangible pecuniary benefit in exchange for the inside information.

The SEC granted two petitions for review last week that tee-up significant issues for full Commission consideration late next Spring. The Commission will consider the application of the Second Circuit's Newman decision restricting the "gifting theory" of insider trading and also will take up the constitutionality of the agency's administrative enforcement forum. Insider-Trading After Newman. ALJ Patil dismissed insider-trading charges against trader Joseph Ruggieri last fall, finding that his tipper hadn't provided the inside information in return for any personal ...

Recent decisions try to clarify insider trading liability, but may have caused more confusion. In United States v. Newman, 773 F.3d 438 (2d Cir. 2014), the Second Circuit explained that to be convicted of insider trading, the tippee must have knowledge that the insider tipper disclosed information in exchange for a personal benefit. What does this mean? In Newman, the tipper and tippee attended business school together and had been colleagues, but they were not "close." The tippee provided career advice and assistance to tipper, but the advice began before the tipper gave the ...

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